Monday, September 21, 2009

Picking Up the Slack

One characteristic of a slowing economy is the increase in unused resources. From unemployment numbers that tell us of workers not being used, to capacity utilization numbers that speak of idle factories, to excess carrying capacity reflected in idled trucks, trains, and airplanes, there are things sitting idle that could be cranking out "stuff."

Today's issue of The Wall Street Journal has an excellent story (free content at this writing) about slack - the unused resources in the economy - putting it in the context of the Federal Reserve's next move. When will improvements in resource markets start signaling an upturn, and the possibility of renewed inflation? The article does have a link to some minimally interactive graphics. It's an opportunity to discuss productive resources and how they are priced (supply and demand). By focusing on the graphs provided, students can discuss how they reflect larger aggregate demand issues in the economy. They might even want to suggest how the first signs of inflation would manifest themselves in the various industries illustrated.

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